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November 11, 2006

Talking Business

The Paradoxes of Businesses as Do-Gooders

The annual Business for Social Responsibility conference came to New York this week, and it only seemed as though half of corporate America ground to a halt to attend. Starbucks was there, of course, in force, but companies like Chevron, J. C. Penney, Pfizer, McDonald’s, Ford Motor and Exxon Mobil all had representatives as well, according to the program. You’d be surprised at the range of companies that are embracing the corporate responsibility mantle. Certainly, I was.

Corporate Social Responsibility, as the movement is called by its adherents, has gone mainstream. The Grand Hyatt Hotel in Midtown Manhattan was teeming with some 1,200 corporate practitioners, experts, headhunters, academics and consultants. (Business for Social Responsibility, which runs the conference, is one of the leading consultants.) “It’s become a sexy field, and lots of people want to get into it,” said someone at my luncheon table on Wednesday, the first day of the conference. That was easy enough to see.

You could walk through the exhibition area and pick up fat reports — fatter in some cases than the annual report —from General Electric or Coca-Cola listing all the things they are doing to make the world a better place: saving the environment, building projects in the third world, ensuring that the labor they employ in developing countries work in decent conditions and get a fair wage. You could attend packed breakout sessions with titles like “Being Green Is Glorious: Beijing’s Green Olympics.” You could watch Time Warner’s chief executive, Richard D. Parsons, parry questions about corporate responsibility in the media industry. You could listen to just about everybody talk about the need for corporations to confront climate change.

And you could listen to people say over and over that being socially responsible just made good business sense, and had become critical to the way their companies did business. “This is core to the way we do business,” said Bob Langert of McDonald’s, the company’s vice president for corporate citizenship.

And you could wonder about that.

OVER 35 years ago, the economist Milton Friedman wrote a famous article for The New York Times Magazine entitled, “The Social Responsibility of Business Is to Increase its Profits.” It’s not hard to find critics of corporate social responsibility who still take that hard-line view.

“C.S.R. is a misguided attempt by a subcategory of business managers to deal with the crisis of corporate legitimacy,” said Isaac Post of the Competitive Enterprise Institute. Russell Roberts, an economist at George Mason University, said: “Doesn’t it make more sense to have companies do what they do best, make good products at fair prices, and then let consumers use the savings for the charity of their choice?” Their essential point is that companies are simply not equipped to “save the world” — nor is it their mission. That’s what governments are supposed to do.

The truth is, though, companies have rarely viewed their role solely as generating profit. Do the shareholders come first — above other “stakeholders” (a favorite buzzword at the conference, by the way, encompassing customers, employees, activists, and so on)? Of course. And in hard times, when profits evaporate, social goals tend to disappear as well. But there is something a little too nihilistic about so narrow and mercenary a goal; most people want more purpose than that. Back in the 1950s and 1960s, the major American companies tended to underwrite many of the large, important endeavors in their headquarters cities: the opera, the big charities, the museums, and so on. These were clearly peripheral to what the company did, but nobody seemed to mind. Nor did they care that the money came out of the shareholders’ pockets.

Much of that old paternalism died as the global economy heated up, and “shareholder value” became the modern mantra. And in fact, what initially spurred the modern corporate social responsibility movement was the rise of nonprofit activist groups, which pushed and prodded — and boycotted — companies to force them toward, say, treating workers better in developing countries.

But then the thing took on a life of its own. Nike, which had been the subject of fierce criticism in the 1990s over the labor practices in the factories it engaged to make its goods, decided it made sense to go the other way completely. It has worked to raise labor standards in the factories it does business with, and now has an extensive monitoring program. Its customers took comfort in that, and so did its employees. Did it help sales? It’s hard to say. But no one’s complaining that shareholder money is being wasted. That’s what the culture was demanding.

Most recently, the environment has taken center stage; indeed, it would be hard to think of anything that has done more to propel the corporate social responsibility movement than the realization that global warming is a real phenomenon with potentially dire consequences. So corporations have raced to get on the right side of that issue.

“We struggled with climate change at Ford,” said Niel Golightly, who was formerly Ford Motor’s corporate responsibility maven. (He recently moved to Shell.) “We were among the first in the industry to openly acknowledge it,” — and that was something, he added, that he took pride in. Ford also worked to make its plants “environmentally responsible,” to use the words on its Web site.

In fact, virtually all of the companies at the conference have set goals for reducing greenhouse gases, and making their operations more energy efficient. I talked to Mark F. Buckley, the vice president for environmental affairs at Staples. He waxed on about how the company had set carbon reduction goals, and had reduced the energy used per square foot in its stores by 14 percent. It was working to help its customers recycle, and reducing the environmental impact of its own branded products. “And it makes the company money,” he said.

From the left, the essential criticism of corporate social responsibility is that it is little more than window-dressing, intended to give companies a good name without having to back it up with real deeds. “There is a whole lot of lip service,” said Judith Melby of Christian Aid, a British-based aid group — and a tough critic of corporate behavior. But when you actually see what these companies are doing, at least the ones at the conference, it is hard to write it off as all window-dressing. Surely, it’s a good thing that companies are trying to lower their energy costs and become more environmentally sensitive. Will that alone solve the problem of global warming? Hardly. But I wound up thinking: why not? It’s better than nothing. And the fact that most corporations are now facing up to the problem of global warming instead of denying it — that’s real progress.

But as to whether it really is “core” to their business, that struck me as another question entirely. “It always makes sense for people to act more responsibly,” said Paul Hawken, the co-founder of Smith & Hawken and a well-known corporate critic and environmentalist. “But what are they responding to? They are responding to stakeholder pressure. To the zeitgeist. To their own internal cultures, as employees retire and younger people take their place. But,” he added, “corporate social responsibility is a very safe place to talk about these things. By safe, I mean it doesn’t challenge the business model.”

And he’s right about that. McDonald’s may support sustainable fisheries, but its core business is still selling Big Macs. Big oil companies can talk all they want about reducing greenhouse emissions but they are still drilling for hydrocarbons. And Ford Motor, well, think for a minute about the predicament that company is in.

When William Clay Ford Jr., great-grandson of the founder, first became chairman in 1999, he talked up his environmental credentials. And internally, Ford has had a first-rate corporate social responsibility program. But for most of his tenure as both chairman and chief executive (he recently stepped down as C.E.O.), the bulk of Ford’s profits have come from gas-guzzling trucks and S.U.V.’s — even as Toyota was working on hybrids and other autos that get better gas mileage and are better for the environment. Would Mr. Ford and his company have been better off if he had taken those environmental values and applied them to the core business of making cars? It’s hard to imagine it could have made things worse.

“Bill Ford understood that we needed to be prepared for better fuel economy,” Mr. Golightly said, “but those things are difficult to do.”

On the second day of the conference, Amory Lovins, co-founder of the Rocky Mountain Institute, made a passionate speech laying out a logical — if quite radical — plan for significantly lowering energy consumption. He showed pictures of prototypes of aerodynamic automobiles that used light-weight materials and could get three to five times better fuel economy. The people in the audience were dazzled — as was I — but I couldn’t help thinking that that kind of radical new auto design, which spoke directly to the business model of the auto industry, wasn’t about to happen anytime soon. It’s a lot easier to come out against global warming than it is to change, fundamentally, the way you do business.

“Value systems change,” said Dr. Daniel Vasella, the chief executive of Novartis, during his keynote, “and it is our duty to adapt our behavior when and where appropriate.” That’s really what has happened here: as the values of Western consuming culture have changed, companies have begun to change with them. That is what the rise of corporate social responsibility really represents.

If the movement takes that next step — if it really does become about the core business model — it won’t be because corporations have led the way. It will be because the rest of us have.